Suez canal charges
Handling fees at Liman
Charges for generating false documents
The total costs approach refers to estimates regarding financials. It helps managers have a precise estimate of the direct and indirect costs a product will inflict on their business. It goes beyond the cost of the product but also looks at other forms of costs. It takes into consideration operation costs and capital for effective decision making. The common costs under scrutiny include shipping costs, tax levied and reshipping costs. It also considers incentives for using another approach like customers orientation. It enables a trader to recover all of his costs.
The option that has the goods passing through Romania is the recommendable route to take. This is in view of the fact that in doing so, various principles considered in the total cost approach are considered. The route may take painfully long at first glance but it holds a number of vital advantages that will ensure a profit return, legality of the transactions and timely payments. I t is important to note that this route is recommendable largely due to legal reasons.
Terim has to choose an option that will have a legal paper trail lest he be charged with promoting terrorism. According to 2002 United States of America president, North Korea was the “axis of evil” and those whom it traded with would be under scrutiny from both the United Nations and the United States. To further aggravate the matter, The United States troops were stationed in South Korea. Terim should then be careful not to seem to engage in illegal trading activities. Being caught in “acts of terrorism” will only increase the costs of doing this business as opposed to reducing the costs and increasing the profits. This will include the costs for hiring an international lawyer to defend him and his business. In the worst case scenario, he may go to jail and have his business closed down for legal purposes. All these can be avoided by taking this route as the goods will show to have legally originated from Romania.
This route is cheaper compared to the route through Syria by 27789.41 dollars. The smart option would be the cheaper option. Profit is calculated by subtracting total costs from the revenue. The smaller the amount of total costs, the more the profit. In using this route, Terim will increase his profit margins.
This route however brings concern because it gives Terim 17 days to sell the merchandise and pay the chemical company. He will therefore have to market his merchandise before its arrival. This will reduce the chances of paying later than the agreed date. This is the only viable disadvantage. All the other factors are advantageous to Mr. Terim’s business in terms of profit and legality of operations.
Robert Ernest Hall, M. L. (2007). Microeconomics: Principles And Applications. Cengage Learning.